Amazon Buys Whole Foods – There’s More to the Story (Part 2 of 3)

Who is Amazon? The surface answer is that it is the world’s largest online retailer. As we will briefly explore, there is a whole lot more to this story.

Prior to diving into who Amazon is, our expectation was to find a company fat with profits, making lots of money and the reason why Jeff Bezos is considered the world’s third richest man. What we found was shocking.

For the years 2011 through 2015, Whole Foods was more than twice as profitable as Amazon. Amazon had its first year of modest profits in 2016 after a string of weak earnings and losses (see graph below). So what gives?

Every year, Whole Foods has been paying dividends to its investors. We assumed that Amazon investors were getting lots of dividends in excess of what Whole Foods paid. Wrong! After researching information on NASDAQ and Amazon’s financial statements, we found a big surprise – Amazon has never paid a dividend.

We thought that Jeff Bezos owned Amazon. Wrong Again! As of 12/31/2016, Bezos owned only 16.9 percent of Amazon. In recent years, while Wall Street has been concerned, Bezos has cashed in approximately $5.4 billion of his stock – $1.8 billion more than the $3.6 billion in net income Amazon made since 2011.

Bezos is the most underpaid CEO – by a large margin – of CEOs in comparable sized companies. According to Amazon’s proxy statement, Bezo’s salary is a paltry $81,840 a year with no stock options. It appears Bezos has to sell stock because Amazon does not have the cash.

The main question here is why Wall Street pegs the market value of Amazon at a whopping $476 billion, when the company can’t even pay dividends? Why are Wall Street investors buying stock in Amazon by the billions of dollars while its founder and CEO (Bezos) is selling his stock by the billions of dollars?

Amazon is deeply in debt – to the tune of $64 billion with annual interest costs of close to a half billion dollars a year. Amazon’s financial statements disclose that the company has virtually no working capital.

So, who is Amazon? If we judge by the financial numbers, Amazon is king of internet sales, but isn’t making enough money. Is it possible that the king of internet sales needs some brick and mortar to shore itself up?

The problem for Whole Foods’ 91,000 employees and numerous suppliers and their employees is if the 83.1 percent of Amazon stockholders want a dividend after the sale to Amazon is complete.